Debt Collection - Part 2: Litigation and Going to Court

Written by Michael Coyle of Lawdit Solicitors on 03 June 2013

Using the law to improve your cash flow

In this second part of our article on Debt Collection we look at disputed debts and how to win your case should you find yourself in Court. In Part 3, we will look at the options for enforcing a Judgement debt (i.e. one ordered by a Court) when you are successful.

I have assumed:

You and the client are both in business and operate in England and Wales.

The unpaid sums are significant and there may be the possibility of a counter claim.

There is a contract in placed based on agreed terms and conditions.

Any litigation will take place in the County Court system and not the High Court.

You are using Solicitors.

Before you embark on the path to litigation it’s important that you think very carefully about the risks involved.

Understanding the risks

When I was a trainee Solicitor, I was taught that if you are going to be successful in Court then your case is only as good as the documents in your possession. The documents will support your case, corroborate your witness statement and allow the Judge and the other side to decide on who is right.

Therefore it is important to carry out a risk assessment and calculate your chances of success. You should seek legal opinion on the merits and pitfalls of bringing a claim. The opinion needs to be in your favour and anything less than a 70% chance of success ought to persuade you to seek to negotiate some form of compromise before you resort to litigation.

Even if you have a good chance of success you need to know if your opponent will be in a position to pay your claim and solicitor’s costs. Do some research and check your opponent’s latest filed accounts. If they have no money in the bank and no assets, you may be throwing good money after bad.

Instructing a solicitor

It is common practice for a solicitor to ask for £5,000 on account, sometimes £10,000 to cover the initial drafting of the claim and Court fees. You will also need to understand the Court fees that will apply to your claim. From April 2011 there are a range of Court fees payable, you can find them here:

Choosing the right track

There are three routes for processing civil cases in England and Wales. They are the small claims track, the fast track and the multi-track system. The small claims track deals with cases where the amount in dispute is £5,000 or less. In the small claims track the losing party will not normally be required to pay the legal fees incurred by the opposing party.

The fast track procedure deals with cases where the value of the claim is between £5,000 and £25,000. The consequence of losing the case will be more significant and the losing party will be required to pay the other side`s costs.

Finally the multi-track system deals with claims for sums exceeding £15,000. Multi-track cases are likely to be longer and therefore more expensive than fast track claims.

It is important you know the consequences of the track your case is assigned. This will ultimately determine the amount of money the losing party will be required to pay and the amount of time you will need to commit to the case, but most cases are assigned to the fast track.

What can I expect as the case progresses?

Assuming there are no hidden surprises then you can expect the following timetable to apply to a fast track case:

Day 1 - Claim Issued and Served on the Defendant along with a response pack.

Day 14 - Defendant to file an Acknowledgement of the Case indicating he is prepared to defend the claim with or without a counterclaim.

Day 28 - Defendant’s defence and Counter Claim filed.

Day 42 - Reply to the Defence.

Day 52 - Claimant files a request for a case management conference (CMC) along with an agreed timetable for the remainder of the case.

Day 70 - Court notifies both parties that a CMC has been set with a time estimate of two hours.

Day 91 - Both parties attend the CMC and a timetable is agreed as follows:

Parties provide a list of all their documents by Day 127

Parties to request copy of those documents by Day 141

Parties to exchange witness statements by Day 155

Trial set for two days and listed for Day 200

A trial can be stressful. Remember, the witness statements deal with all aspects of the claim and must adequately cover the issues. If it’s not in your witness statement then you cannot rely on it in Court. All your attention should go in to your witness statement – a robust and comprehensive witness statement with reference to your documents will win you your case.

Try and Mediate

Finally, as Winston Churchill once said, “To jaw-jaw is always better than to war-war”. Often the only winner in litigation is the solicitor so it is advisable to avoid the Courts whenever possible. Try and offer some form of compromise or solution to the problem - it may be frustrating but that is the nature of a compromise - you don’t get everything you want, but avoiding the costs, uncertainty and stress of going to Court is often worth it.